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The Wall Street Journal recently alleged that Tether, the issuer behind the world’s largest stablecoin, USDT, is under federal investigation for potential violations of anti-money laundering (AML) regulations. However, Tether’s CEO has firmly denied these claims.
The report states that the U.S. government is scrutinizing Tether for possibly breaching AML rules and sanctions. This investigation, allegedly led by prosecutors from the Manhattan U.S. attorney’s office, seeks to determine if USDT has been used by third parties for unlawful purposes. Following this news, Bitcoin’s value dropped from $68,600 to $66,589.
Yet, Tether CEO Paolo Ardoino responded swiftly, stating that there is no truth to the report. “As we told the WSJ, there is no indication that Tether is under investigation,” Ardoino posted on Twitter. “The Wall Street Journal is recycling outdated claims. Full stop.”
As one of the first stablecoins in the cryptocurrency space, Tether has maintained its peg and met redemptions consistently. Nevertheless, speculation around its $100 billion reserves has persisted. Howard Lutnick, CEO of Cantor Fitzgerald, a firm involved in managing Tether’s U.S. Treasury holdings, has backed the company’s claims regarding its reserves.
Tether has faced criticism from rivals like Coinbase and Circle, who have questioned its role in potentially facilitating illicit financing. “Given Tether’s reputation and evidence we’ve seen, I hope regulators are examining this matter closely,” a Circle spokesperson remarked in a Congressional hearing earlier this year.
A Record-Breaking Year for Tether
Recently, Tether’s dollar-pegged stablecoin, USDT, achieved a historic milestone, crossing a $120 billion market capitalization on October 20, as reported on Tether’s website. This expansion signals potential market optimism, as rising stablecoin demand often precedes a surge in cryptocurrency prices.
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Stablecoins play a vital role in bridging fiat and digital currencies, with increased supply often seen as a precursor to an anticipated bull run in crypto. With Tether minting an additional $1.3 billion USDT in early August after Bitcoin dipped to a five-month low, Bitcoin prices quickly recovered, gaining over 21% by August 9 to hit $60,271.
Will $120 Billion in USDT Boost Bitcoin Rally?
Tether’s expanding stablecoin supply could spark the anticipated October “Uptober” rally—a term that reflects the historical upward trend of Bitcoin prices in October. Tether’s treasury has recently moved substantial sums to major exchanges, with Arkham Intelligence data revealing transfers of over $66 million in stablecoins to Binance and more than $20 million to Kraken in the past two days.
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Increased stablecoin flows to exchanges typically suggest intensified buying interest. On the other hand, a drop in stablecoin transfers often correlates with a market cooldown. For example, on August 12, a reduction in stablecoin inflows coincided with a 4% drop in Bitcoin’s price below the $60,000 benchmark as institutional buying temporarily paused.
Featured image by DrawKit Illustrations
